How to choose a homeowners insurance deductible

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Your homeowners insurance deducible is the amount you will pay out of pocket if you file a claim.

The deductible you choose affects your insurance premiums. A higher your homeowners insurance deductible means a lower premium and vice versa. Insurance companies reward you for taking on a larger portion of the responsibility in a claim. They also know that people with a higher deductible won't file small claims.

You need to choose a homeowners insurance deductible that makes sense for you and your finances.

Key takeaways

A home insurance deductible is the amount you pay out of pocket when you file a claim.
The average homeowners insurance deductible is $500, but it can be much higher.
Some companies use a percentage-based deductible, particularly for hurricane damage.

IN THIS ARTICLE

How does a home insurance deductible work?
Types of homeowners insurance deductibles
When do you pay the deductible for homeowners insurance?
Homeowners insurance disaster deductibles
Home insurance deductible calculator
What is the standard deductible for homeowners insurance?
What’s the right home insurance deductible?
How much do home insurance claims increase rates?
Shopping around can provide the real savings
Frequently asked questions: Home insurance deductibles

How does a home insurance deductible work?

A home insurance deductible is the amount a homeowner must pay toward a claim before the insurer pays its part. When they insurance company issues a settlement check, it will deduct the amount of your deductible from that settlement.

Let's look at an example:

You have a $500 deductible.
A fire causes $12,000 worth of damage.
You would pay $500 and the insurer would pick up the remaining $11,500.

The same homeowners insurance deductible amount (sometimes referred to as an “all-peril” deductible) applies to most property claims, whether it’s damage, theft, fire or burst pipes. Other types of home insurance claims, such as ones against your liability coverage or guest medical, rarely come with deductibles attached.

Types of homeowners insurance deductibles

A deductible is the amount you pay when you file a claim, but there isn't just one type of deductible. There are three main types of homeowners insurance deductibles that figure out what you're responsible for paying:

A dollar amount. This amount is set and you will pay the same amount regardless of the amount of the claim. If you have a $500 deductible that is what you pay, whether the claim is for $2,000 or for $20,000. This is the most common type of deductible.

A percentage. Percentage-based is when your deductible is a percentage of your insurance policy’s total coverage amount. So, if your home is insured for $200,000 and your deductible is 2%, you'd have to pay the first $4,000 of any claim (2% of $200,000 = $4,000).

A split. This is a hybrid of the first two. A dollar amount applies to most claims, but a percentage can be triggered by certain events, such as a hurricane or earthquake (see below).

When do you pay the deductible for homeowners insurance?

Homeowners insurance deductibles apply to every claim, regardless of how many you make during a year. In that way, it’s similar to an auto insurance deductible.

There are exceptions; for example, Florida allows only one deductible each hurricane season for that particular risk.

Auto and home insurance deductibles are different from health plans. Generally, health insurance has an annual deductible, and, once you've reached that amount of money, the insurance company pays for everything else that year, subject to co-payments and co-insurance.

Homeowners insurance disaster deductibles

Insurers often try to protect themselves against major disaster claims. They can do that by imposing or encouraging high deductibles that apply only to those exceptional risks.

Earthquakes

Earthquakes aren't covered under standard insurance policies -- even if you live in areas prone to them. Instead, earthquake insurance is obtained with a separate insurance policy or an endorsement. One part of the policy is for the dwelling and another covers personal property. There is normally a deductible and limit assigned to each portion.

For example:

If an earthquake damaged your house and you had $300,000 worth of dwelling coverage with a structure deductible of 20%, you would pay $60,000.
After that amount is deducted, your insurance company would pay the remaining $240,000.
If your personal property limit was $50,000 with a 10% deductible and you claimed that full amount, $5,000 would be deducted from the settlement.

The California Earthquake Authority (CEA) offers coverage to California residents. A standard CEA policy in California includes a 15% deductible. However, its “Homeowners Choice” insurance policy lets you choose separate coverage for dwellings and personal property with different deductibles.

For other parts of the nation, deductibles typically range from 5% to 20% of your replacement cost of the structure covered. However, it’s typical for insurance companies in high-risk areas to insist you have a deductible of at least 10%.

According to the Insurance Information Institute (III), that's commonly the case in Nevada, Utah and Washington. But that 10% wouldn't apply to all claims -- only to those arising from an earthquake. That's the split deductibles that we mentioned above.

Hurricanes, wind and hail

The situation is generally similar for hurricane and wind/hail deductibles. Hurricane deductibles apply to damage solely from hurricanes. Windstorm or wind/hail deductibles apply to wind damage.

Percentage-based deductibles typically apply to these coverages and run from 1% to 5% of the home’s insured value. Some states give homeowners the option of paying a higher premium to carry a traditional dollar deductible. This is seldom allowed, though, if you live in a coastal area.

Depending on your state's law and your insurer's protocols, a hurricane deductible may only apply once the National Weather Service designates a tropical storm as a hurricane or reports a particular wind-speed threshold. The only way you can be sure of the factor that triggers your exceptional deductible is to check your insurance policy or talk to your insurance company.

The III lists 20 states, plus the District of Columbia, that have hurricane deductibles:

Alabama
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Louisiana
Maine
Maryland
Massachusetts
Mississippi
New Jersey
New York
North Carolina
Pennsylvania
Rhode Island
South Carolina
Texas
Virginia

Discover more at Hurricanes and home insurance guide.

Floods

Flooding is a special case. That’s not covered by standard homeowners insurance. You can ask your insurance company whether it offers coverage for this additional risk or buy protection from the federal government's National Flood Insurance Program (NFIP). Flood deductibles under NFIP plans range from $1,000 to $10,000.

Home insurance deductible calculator

The best deductible for homeowners insurance often depends on your financial situation.

Insurance companies use deductibles to reduce minor claims -- and lower payouts on major claims. Taking on less risk allows insurance companies to reduce your premiums when you choose a higher deductible amount. High deductible insurance can reduce your payments by between 20% and 40% depending on your insurance company and coverage.

An Insurance.com rate analysis of how much you can save in every state by hiking your homeowners deductible shows homeowners can trim an average of $260 off their premium by increasing a $500 deductible to $2,500.

Florida homeowners, who pay the most for home insurance nationwide, save the most by increasing their deductibles from $500 to $2,500. They can save an average of $675 each year. Those in Idaho, the third-cheapest state for home insurance, would save the least ($96), according to Insurance.com’s analysis.

Most insurance companies impose a minimum deductible but allow you to increase it in exchange for lower premiums. A lower deductible can be an attractive deal if you couldn't afford more than $1,000 if you had to file a claim.

On the other hand, you may prefer a high deductible if you want to pay cheaper insurance premiums.

The following data give you an idea of what you save on a premium by raising your deductible. Here are rates for capital cities in Alabama, California, Colorado, Florida, Kansas, New Hampshire, New York, Ohio, Texas, Virginia and Washington, representing various regions of the country. The coverage level is $300,000 for property and $100,000 for liability.

Annual premium by deductible amount

State and capital	Insurance Company	$500	$1,000	$1,500	$2,000	$2,500	Savings from $500 to $2500 deductible
Sacramento, California	Allstate	$1,169	$997	$997	$825	$825	$344 or 42%
Sacramento, California	Fire Insurance Exchange	$2,210	$2,035	$1,859	$1,618	$1,618	$592 or 37%
Sacramento, California	Liberty Mutual	$1,817	$1,622	$1,622	$1,426	$1,426	$391 or 27%
Sacramento, California	Mercury	$679	$575	$575	$471	$471	$208 or 44%
Sacramento, California	State Farm	$1,150	$1,150	$1,063	$1,024	$976	$174 or 18%
Sacramento, California	Travelers	$858	$771	$728	$618	$618	$240 or 39%
Montgomery, Alabama	Alfa Mutual Insurance	$2,562	$2,246	$2,020	$1,972	$1,972	$590 or 30%
Montgomery, Alabama	Allstate	$3,651	$3,016	$2,991	$2,976	$3,001	$650 or 22%
Montgomery, Alabama	Foremost Insurance	$2,198	$2,108	$2,108	$2,018	$2,018	$180 or 9%
Montgomery, Alabama	Liberty Mutual	$3,538	$3,120	$3,120	$3,076	$3,076	$462 or 15%
Montgomery, Alabama	State Farm	$2,747	$2,747	$2,459	$2,459	$2,281	$466 or 20%
Montgomery, Alabama	Travelers	$1,858	$1,829	$1,807	$1,775	$1,775	$83 or 5%
Montgomery, Alabama	United Service Automobile	$1,314	$1,275	$1,214	$1,214	$1,214	$100 or 8%
Albany, New York	Allstate	$1,509	$1,305	$1,209	$1,209	$1,140	$369 or 32%
Albany, New York	Liberty Mutual	$2,013	$1,685	$1,685	$1,574	$1,574	$439 or 28%
Albany, New York	New York Central Mutual	$769	$670	$637	$597	$597	$172 or 29%
Albany, New York	State Farm	$942	$851	$778	$762	$739	$203 or 27%
Albany, New York	Travco Insurance	$1,148	$1,021	$1,021	$883	$883	$265 or 30%
Denver, Colorado	Allstate	$3,413	$3,132	$2,900	$2,703	$2,408	$1,005 or 42%
Denver, Colorado	American Family	$2,101	$1,892	$1,808	$1,723	$1,682	$419 or 25%
Denver, Colorado	Farmers Insurance	$3,782	$3,455	$2,926	$1,287	$2,575	$1,207 or 47%
Denver, Colorado	Safeco	$1,839	$1,764	$1,712	$1,663	$1,617	$222 or 14%
Denver, Colorado	State Farm	$1,982	$1,982	$1,982	$1,982	$1,982	$0
Denver, Colorado	Travelers	$2,518	$2,353	$2,251	$2,066	$2,066	$452 or 22%
Denver, Colorado	USAA	$2,199	$1,898	$1,419	$1,419	$1,419	$780 or 55%
Topeka, Kansas	Allstate	$2,743	$2,524	$2,348	$2,081	$2,081	$662 or 32%
Topeka, Kansas	American Family	$2,715	$2,382	$2,239	$2,096	$1,954	$761 or 39%
Topeka, Kansas	Farm Bureau	$2,845	$2,180	$2,050	$1,904	$1,769	$1,076 or 61%
Topeka, Kansas	Farmers Insurance	$2,501	$2,292	$2,116	$1,849	$1,737	$764 or 44%
Topeka, Kansas	Safeco	$2,090	$2,017	$1,965	$1,917	$1,873	$217 or 12%
Topeka, Kansas	State Farm	$2,261	$2,261	$2,261	$2,056	$2,056	$205 or 10%
Topeka, Kansas	Travelers	$4,630	$4,366	$3,776	$3,466	$3,466	$1,164 or 34%
Columbus, Ohio	Allstate	$1,011	$954	$878	$849	$838	$173 or 21%
Columbus, Ohio	American Family	$1,345	$1,259	$1,221	$1,183	$1,145	$200 or 17%
Columbus, Ohio	Cincinnati Insurance	$916	$871	$844	$817	$789	$127 or 16%
Columbus, Ohio	Erie Insurance	$1,122	$985	$870	$700	$700	$422 or 60%
Columbus, Ohio	Farmers	$1,067	$982	$877	$791	$791	$276 or 35%
Columbus, Ohio	Liberty Mutual	$1,428	$1,130	$1,130	$1,045	$1,045	$383 or 37%
Columbus, Ohio	Nationwide	$1,349	$1,162	$1,088	$1,006	$1,006	$343 or 34%
Columbus, Ohio	State Farm	$1,857	$1,857	$1,658	$1,658	$1,536	$321 or 21%
Columbus, Ohio	Travelers	$1,258	$1,026	$1,026	$945	$945	$313 or 33%
Richmond, Virginia	Erie Insurance	$2,284	$2,039	$2,019	$1,994	$1,974	$310 or 16%
Richmond, Virginia	Farmers Insurance	$1,201	$1,073	$964	$871	$795	$406 or 51%
Richmond, Virginia	Liberty Insurance	$2,304	$2,112	$2,112	$1,878	$1,878	$426 or 23%
Richmond, Virginia	Nationwide	$1,448	$1,075	$1,075	$962	$962	$486 or 51%
Richmond, Virginia	State Farm	$1,551	$1,392	$1,519	$1,307	$1,307	$244 or 19%
Richmond, Virginia	Travco	$1,449	$1,449	$1,325	$1,302	$1,212	$237 or 20%
Richmond, Virginia	USAA	$1,051	$979	$929	$857	$857	$194 or 23%
Richmond, Virginia	Allstate	$1,010	$968	$889	$889	$889	$121 or 14%
Tallahassee, Florida	Castle Key Insurance	$1,122	$1,051	$1,051	$1,051	$1,051	$71 or 7%
Tallahassee, Florida	Florida Peninsula Insurance	$1,654	$1,512	$1,512	$1,406	$1,406	$248 or 18%
Tallahassee, Florida	State Farm	$2,640	$2,261	$1,882	$1,882	$1,715	$925 or 54%
Tallahassee, Florida	First Floridian	$1,372	$1,325	$1,325	$1,220	$1,220	$152 or 12%
Tallahassee, Florida	United	$1,833	$1,654	$1,654	$1,410	$1,410	$423 or 30%
Tallahassee, Florida	Universal	$2,085	$1,865	$1,865	$1,700	$1,700	$385 or 23%
Tallahassee, Florida	USAA	$2,144	$2,044	$1,965	$1,965	$1,965	$179 or 9%
Austin, Texas	Allstate	$2,563	$2,345	$2,229	$2,229	$2,024	$539 or 27%
Austin, Texas	Safeco	$908	$866	$836	$808	$782	$126 or 16%
Austin, Texas	Texas Farmers	$1,486	$1,453	$1,425	$1,405	$1,091	$395 or 36%
Austin, Texas	Travelers	$1,122	$1,031	$966	$871	$871	$251 or 29%
Austin, Texas	USAA	$1,279	$1,231	$1,149	$1,149	$1,149	$130 or 11%
Concord, New Hampshire	Concord General	$841	$587	$466	$435	$541	$300 or 55%
Concord, New Hampshire	Liberty Mutual	$785	$700	$661	$589	$589	$196 or 33%
Concord, New Hampshire	State Farm	$1,054	$796	$796	$531	$531	$523 or 98%
Concord, New Hampshire	Travelers	$1,833	$1,561	$1,561	$1,357	$1,357	$476 or 35%
Concord, New Hampshire	Vermont Mutual	$1,269	$1,269	$1,150	$1,125	$1,125	$144 or 13%
Concord, New Hampshire	Allstate	$750	$721	$698	$660	$660	$90 or 14%
Concord, New Hampshire	Amica	$816	$679	$679	$644	$644	$172 or 27%
Olympia, Washington	Allstate	$684	$647	$617	$592	$555	$129 or 23%
Olympia, Washington	American Family	$832	$737	$700	$664	$635	$197 or 31%
Olympia, Washington	Farmers	$1,194	$1,133	$1,133	$976	$976	$218 or 22%
Olympia, Washington	Pemco	$788	$674	$638	$569	$569	$219 or 38%
Olympia, Washington	Safeco	$791	$736	$736	$667	$667	$124 or 19%
Olympia, Washington	State Farm	$1,186	$1,186	$1,034	$1,034	$958	$228 or 24%
Olympia, Washington	Travelers	$732	$693	$662	$613	$613	$119 or 19%
Olympia, Washington	USAA	$766	$710	$609	$609	$609	$157 or 26%

You can choose among six deductible amounts when using Insurance.com's average home insurance rate by ZIP code tool to see how premiums compare based on deductible, dwelling and liability amounts.

What is the standard deductible for homeowners insurance?

There is no standard deductible, but the average homeowners insurance deductible is $500.

“Not all that long ago, a $100 deductible was the standard deductible amount, but in keeping with inflation, the standard moved to $250. As property claims started to escalate and new coverages were developed, it wasn’t long until $500 became the new standard,” said P.J. Miller, insurance agent, Wallace & Turner Insurance in Springfield, Ohio.

Miller added that many insurance companies also offer disappearing deductibles. In those cases, companies reduce your deductibles if you don't file a claim over a period. So, your $500 deductible may shrink to $100 if you don't make a claim in three years.

Miller said some insurers have also attached higher deductibles to roof claims. Insurance companies usually want homeowners to replace their roof after 20 or 30 years.

What’s the right home insurance deductible?

The homeowners insurance deductible that’s right for you depends on your financial situation.

“Go with the highest deductible you’re comfortable with, whether that’s psychologically or monetarily,” Miller says. “And don’t think about it on a one-year basis as that tends to skew the thinking because you want to reduce your homeowner premium as much as possible over the course of your homeownership. A substantial deductible like $1,000 or $2,500 might save you $100 or even $200 to $300 or more on an annual basis, and after five years, you’ve put a dent in that homeowner premium.”

Here are some scenarios to help you figure out which deductible to choose:

You have a lot of savings. If you have a savings account that can more than handle a higher deductible, there's no reason not to keep those insurance premiums in your pocket.
You have little to no savings. If your savings account would be decimated by a financial emergency, you are probably better off with a lower deductible.
You're financially stable but that could change soon. If you're doing ok financially but there are changes in the near-future that will affect that, such as the end of child support payments or retirement, consider a lower deductible. You don't want to forget to change it and realize too late that you can't afford it anymore.

How much do home insurance claims increase rates?

One of the biggest indicators of risk used by insurers when they calculate your premium is your record, including how often you file a claim. Statistically, if you've made claims in the past, you're more likely to do so again.

So, after you file a claim, your homeowners insurance company may raise your premium at renewal.

Here are the top 10 average home insurance percentage increases based on claims:

Filing a second fire claim -- 44%
Filing a second liability claim -- 39%
Filing a second theft claim -- 38%
Filing a second water claim -- 33%
Filing a fire claim -- 20%
Filing a liability claim -- 19%
Filing a theft claim -- 19%
Filing a water claim -- 16%
Filing a weather claim -- 16%
Filing a second medical claim -- 13%

So, beware of potential rate increases after you make a claim.

Shopping around can provide the real savings

Insurance companies can dazzle you with apparently generous savings for deductibles. But, just as with all discounts, those savings may not be as attractive as they first seem.

The only way you can be sure you're getting the best deal is to shop around for competitive quotes every time you renew or amend your policy. Check out the best homeowners insurance companies. Know what homeowners insurance discounts to ask about and be aware of the key factors that affect homeowners insurance rates. Also, get quotes for multiple deductible levels to see what's the best deal for you.

Frequently asked questions: Home insurance deductibles

Is a $2,500 deductible good for home insurance?

A $2,500 deductible is on the upper end of deductible amounts for most standard homeowners insurance policies, which means you'll pay a lot less in premiums. If you can easily afford $2,500, it's a good choice.

Am I required to pay my homeowners insurance deductible?

Yes. If you file a claim for home repair, the contractor will be the one to receive the deductible amount. If you do not pay the contractor for the work they’ve performed, they can sue you and have a lien placed on the property. Additionally, the insurance company will not step in to pay for the remainder of the repair if you do not pay your deductible first.